Borrower Contact Key

Westlake Village, CA-Proactive communication can give the upper hand to mortgage servicers struggling to dissociate themselves from the industry's bad reputation and improve customer retention rates.

J.D. Power and Associates new Primary Mortgage Servicer Satisfaction Study confirms that mortgage servicers that initiate contact with customers who are in default (or worried about being late on their mortgage payments) can significantly increase customer satisfaction and loss mitigation efficiency.

The research firm here found that customer satisfaction averages 651 on a 1,000-point scale, when mortgage servicers first initiate the contact compared to a score of 613 when customers are the ones making the first point of contact by dialing their servicer.

Furthermore, of the customers who note their servicer was helpful in dealing with their current situation, 21% say they definitely will use that servicer again, compared to only 1% of customers who say their servicer was not helpful and plan to use them again.

"Taking care of customers in their hour of need is critically important, particularly among homeowners with otherwise blemish-free credit histories," says J.D. Power and Associates director of financial services, David Lo. "It can form lasting positive impressions of servicers and create lifelong customers."

The study, which is based on the primary mortgage servicer experiences of over 5,000 homeowners in May 2009, found that 21% of respondents indicate they are either already behind on their mortgage payments or are worried about being late in the future, which as a rule represents a customer segment with lower mortgage servicer satisfaction rates.

"What's different this year compared to last year is the effect of macroeconomic factors," says Mr. Lo. "Home values have only recently started to bottom out. In May home values were still declining at alarming rates driving to a degree increases in delinquencies and foreclosures, and that is higher compared to a year ago."

He noted that loan modifications have surged over the past year with more consumers calling their servicers but the borrower doesn't "always like what they're hearing because not everyone qualifies, and generally these customers tend to be less satisfied. It will be interesting to see how HAMP [Home Affordable Modification Program] settles down and how it shapes customer satisfaction in the next 12 months."

This year the primary mortgage servicers with the highest customer satisfaction rate scores are Regions Mortgage of Alabama with 780 for its performance in the annual account review/administration and payment processing areas, followed by Branch Banking & Trust, Wilson, N.C., with 777, and U.S. Bank of Minnesota with 771.

According to JDP, Regions Mortgage had a limited number of customer-reported problems, easy access to online statement information and very efficient and accurate payment processing. BB&T resolved servicing issues reported by customers that contacted the bank during the past year up to 82% of the time, which is well above the industry average of 69%. Regions said it has modified 35% of all residential first mortgages that were delinquent by 60 days or more either through HAMP or its Customer Assistance program, "which far exceeds the national average of 9% as reported by the U.S.Department of Treasury in July 2009."

Findings show that servicers who perform well on some of the five key fundamentals of loan servicing - keeping problems and complaints to a minimum with fast and effective problem resolution and payment choices - have higher levels of loyalty and retention. Quality service also increases the chances a customer will recommend the mortgage servicer to others. In contrast, he says, "Just one dissatisfied customer translates to an average of more than five negative recommendations."

Over 20% of customers whose mortgage servicers consistently perform all five top service practices say they "definitely will" recommend their mortgage servicer to others.

Among those mortgage servicers that fail to perform three or more of the top service practices, nearly one-third of customers say they would not choose the servicer again. "The current challenging economic circumstances give mortgage servicers an opportunity to grow their business, particularly with low interest rates and the large number of customers who wish to refinance their mortgages," Mr. Lo says.

As of late, loan modifications have become more important, he adds, because more people are delinquent, or think they might be in the future.

"But to execute a loan modification takes you back to the execution of the fundamentals of loan servicing. Taking care of contacts and questions when the homeowner calls in, making promises, keeping promises, all those are critically important."

To a certain degree the government has taken loan modification guidelines off the hands of servicers, he says, "so it is more a matter of execution." One such fundamental, communication quality, appears to matter especially to customers in distress. Up to 18% of customers who contacted their servicer had difficulty understanding the representative. Among this group, contact satisfaction declined by almost 50% to an average of 353, compared with an average of 707 among customers who didn't have any difficulty understanding their representative.

Concerns include complaints that the representative spoke with an accent, or could not articulate clearly bringing to mind comments by some industry insiders who maintain that loss mitigation should be an onshore operation.

In order of importance the study measures customer satisfaction based on four factors affecting loan servicing: Annual account review and administration (34%), payment processing (25%), billing statements and payment coupon books (22%), and customer contact (18%).

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